Buying a home in a seller’s market

The truth is that people buy and sell houses because of the time in their lives, not the economic condition of the housing market.

That said, it is May of 2018 and home buyers are being shocked by prices and low inventory levels. If you’re going to buy a home now, it can be done – you’re just going to pay more than you would even 6 months ago.

I started my career during the previous housing bubble in 2005/2006. I’m going to give you some advice that I wish I had the experience to deliver back then. There are ways to buffer and protect yourself from the effects of the current market. Here are three:

Avoid short term purchases. Plan to live in the property for at least 5-7 years before deciding to buy. If it’s less than 5 years, there’s a reasonable chance you’re going to lose when you sell. “Buy high and sell low” is the American way – and I don’t encourage it.

Finance with a 20 year loan. The difference between a 20 year and 30 year mortgage isn’t that great. And if the payment difference keeps you from buying the home you want, I’d offer that you might be buying too much home. Five years from your purchase date, your home on a 20 year note will have equity. Five years on a 30 year and you’ve pretty much just paid interest. The reason I suggest a 20 year loan is you pay less interest over the life of the loan.

Pay extra on your mortgage each month. The principle balance on your mortgage is your mortal enemy while buying in this market. Paying a little extra each month has a cumulative effect and saves you a ton of money over the life of the loan.

Follow these rules and you won’t kick yourself for buying a home when the time in your life was right for doing so.